Dynamic Asset Allocation Mutual Funds

It is a hybrid fund that shifts its money between shares and debt, with no fixed split. A mutual fund is a pool of money from many people, invested by a professional manager under SEBI rules. A hybrid fund holds more than one type of asset. Here the two types are equity and debt. Equity means shares of companies. Debt means loans to governments, banks or companies, in the form of bonds and similar paper.

SEBI's name for this category is 'Balanced Advantage Fund / Dynamic Asset Allocation Fund', so a fund may use either name. The two labels mean one category with one rule.

SEBI describes the category as "Investment in equity/ debt that is managed dynamically". The scheme type reads "An open ended dynamic asset allocation fund investing in debt and equity instruments only". Open ended means the fund has no fixed end date.

Asset allocation is how money is split between types of investment, such as shares and bonds. In these funds the split moves as the fund's model or manager decides.

The rule comes from SEBI's circular of 26 February 2026, now part of its Master Circular of 20 March 2026. Each fund house may offer only one scheme in this category.

None: SEBI sets no minimum or maximum for shares or debt in this category. A fund can move from almost no equity to almost all of it.

Set that beside an aggressive hybrid fund, which must keep 65% to 80% in equity at all times.

SEBI lets each fund decide its own mix. The scheme document, the fund's official offer paper, explains how the fund decides. One fund, for example, might look at how expensive shares are. The monthly factsheet then shows how much the fund holds in shares.

Many of these funds hold more shares than they are really exposed to, because they hedge part of them. Hedging here means the fund buys a share and sells a futures contract on it. A futures contract is a deal to sell the share later at a price fixed now, so the two price moves cancel out. The factsheet's net equity figure is the real exposure, after those hedges.

Every fund must also publish its full portfolio as on the last day of each month. It goes on the fund house's website and AMFI's within 10 calendar days. AMFI is the mutual fund industry body.

The more the fund holds in shares when prices drop, the bigger your loss.

Suppose you invest ₹2,35,000 and share prices fall 20%, while the bond part holds its value. The 20% fall and both share levels below are assumptions. They are not SEBI limits, and not what any fund holds.

• Fund at 80% in shares: ₹1,88,000 is in shares. A 20% fall takes off ₹37,600, leaving ₹1,97,400.
• Fund at 30% in shares: ₹70,500 is in shares. The same fall takes off ₹14,100, leaving ₹2,20,900.

Same category, same market; only the share level differs.

The bond part is not fixed either. When interest rates rise, bond prices tend to fall, and when rates fall, prices tend to rise (SEBI's investor website says this). That is interest-rate risk. So the bond part of the fund can also lose value when rates rise.

The riskometer is the risk label SEBI makes every fund show, checked every month. For a fund that holds both shares and bonds, SEBI scores each part and weights it by its share of the fund. It adds the parts up, and the total maps to one of six levels, from Low to Very High.

Shares the fund has hedged are left out of the riskometer. So the dial reflects the part of the fund that is really exposed to share prices.

Most listed dynamic asset allocation funds read Very High on 29 September 2026; a few read High or Moderately High. If a fund's level changes, it must tell investors by email or SMS.

When markets fall sharply, Koshex talks you through it before you redeem.

Because SEBI lets each fund hold a different mix, and the tax follows the mix. The Income-tax Act, 2025, in force from 1 April 2026, gives three routes:

• Equity-oriented fund: at least 65% in shares of Indian companies listed on a stock exchange (section 198(8)). It is measured as a yearly average of monthly figures.
• Specified Mutual Fund: more than 65% in debt and money market instruments (short-term lending), on a yearly average of daily figures (section 76).
• Neither: the general capital gains rules apply (section 197).

Shares the fund has hedged still count as shares for the tax test.

Which route applies depends on what the fund actually held over the year. Some fund houses state it in the factsheet or scheme document. Where yours does not, check the scheme documents or ask the fund house before you count on equity rates.

Your holding period matters too. That is how long you have owned a unit, from the day you bought it to the day you sell it.

A worked example. Suppose you sell units held for 30 months at an assumed gain of ₹1,78,000. You have no other equity gains that tax year. Assume total income of ₹50 lakh or less, so no surcharge (an extra charge on the tax) applies. Health and Education Cess adds 4% to the tax.

• Fund met the equity test: held over 12 months, so this is a long-term capital gain. Only the part above ₹1,25,000 in a tax year is taxed, at 12.5%. ₹53,000 × 12.5% is ₹6,625, plus ₹265 cess: ₹6,890.
• Fund met neither test: held over 24 months, so 12.5% on the whole gain. That is ₹22,250, plus ₹890 cess: ₹23,140.
• Specified Mutual Fund, units bought on or after 1 April 2023: the gain counts as short-term whatever the holding period. It is taxed at your slab rate, the normal income-tax rate for your income band. At a 20% slab you pay ₹37,024 with cess; at 30%, ₹55,536.

Sell equity-oriented units held 12 months or less and you have a short-term capital gain, taxed at 20% (section 196). Under the general rule, units held 24 months or less are taxed at your slab rate.

There is no TDS (tax deducted at source) on a resident's gains from selling units. IDCW is a payout from the fund's income or gains; the unit price drops by the same amount. You pay tax on IDCW at your slab rate. When your IDCW from one fund house passes ₹10,000 in a tax year, it takes 10% TDS from the whole payout. You get credit for that TDS against your tax for the year.

The difference is how much freedom SEBI gives the manager over the mix.

• Dynamic asset allocation: shares and debt only, with no SEBI minimum or maximum for either.
• Aggressive hybrid: 65% to 80% in equity and 20% to 35% in debt, always.
• Multi asset allocation: at least three asset classes, with at least 10% in each. Foreign securities do not count as a separate class.

Tax differs as well. An aggressive hybrid fund gets equity rates only if it keeps at least 65% in Indian listed shares on the yearly average. SEBI's 65% counts equity and equity-related instruments, which is not quite the same thing. So a fund could meet SEBI's floor and still miss the tax test. A multi asset allocation fund is taxed fund by fund on the three routes above, like a balanced advantage fund.

On risk, nearly every listed aggressive hybrid fund read Very High on 29 September 2026. Most listed multi asset allocation funds read Very High that day, and the rest read High.

Koshex suggests 5 years or more for both neighbours, and 3 to 5 years here. None of these is a SEBI rule.

Someone whose money can stay put for 3 to 5 years, and who is content to let the fund set its own share level. That horizon is Koshex's suggestion, not a SEBI rule.

Picture a goal like the cost of moving the family to a bigger city in about five years. The fund could be heavy or light in shares in the months before you need that money.

SEBI does not set an exit load for this category. An exit load is a fee some funds charge if you sell within a set time after buying. Each fund sets its own terms in its scheme document. Many charge a load on units sold within a year, or within 30 days. Some let you take out part of your units free.

There is no lock-in, a period during which you cannot sell at all. SEBI requires your money to reach you within 3 working days of a sale.

Koshex offers the regular plan, meaning the version of a fund you buy through a distributor. That is a registered intermediary who helps you buy and manage funds, and Koshex's AMFI registration is ARN-154632. Koshex helps you choose a fund that suits your goal and timeline. It also reviews your holdings over time and flags changes, such as a fund's category, risk or ranking shifting.

Start with the share level, because here it drives the risk. The factsheet's net equity figure shows the real exposure after hedges, and the monthly portfolio lists every holding.

There are 36 listed dynamic asset allocation funds. Of these, 28 have a three-year record and are ranked on 3-year return and counted in the averages. Together the listed funds manage ₹3,30,997 Cr. That is their AUM (assets under management), the current value of the money they manage.

Next, compare each fund's three-year and five-year CAGR with the category averages. CAGR is the average yearly growth rate over a period, as if the fund had grown at the same pace every year. The three-year average is 3.3%, and the five-year average is 7.0%. Past returns do not predict future ones.

Then check:

• the expense ratio, the yearly fee as a percentage of your money, taken out of the fund's value
• the riskometer level
• whether the fund is taxed as equity, from its factsheet, scheme document or fund house
• the exit load, in the scheme document

A few funds of funds also appear in the list. They invest in other mutual funds rather than directly in shares and bonds. Their tax differs from that of the funds they hold, so check the scheme document.

With a SIP you put in a fixed amount at regular intervals, usually monthly; each instalment has its own holding period. A lumpsum invests a larger amount at one time; the SIP calculator and lumpsum calculator show both.